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Interim trading update

15 July 2010

IQE plc (AIM: IQE, “IQE” or the “Group”), the leading global supplier of advanced semiconductor wafer products and wafer services to the semiconductor industry, provides an interim trading update for the six months to 30 June 2010. As a result of stronger than expected wireless product sales and increasing demand for optoelectronic and silicon-based wafers, the Board expects first-half performance to be significantly ahead of market expectations. The Group expects to report first-half revenues of at least £32.8 million, EBITDA above £5.3 million and retained profit of more than £2 million. Compared with the first half of 2009, this represents revenue growth of over 50% with EBITDA up over 178%, illustrating the Group’s powerful operational leverage. First-half growth was driven by good recovery in the wireless market with particularly strong demand for smartphones. The Group achieved higher than expected sales in the normally weak first quarter with demand accelerating in Q2 and looking robust for the remainder of the year. Demand increased strongly for optoelectronic products, in particular IQE’s world-leading Vertical Cavity Surface Emitting Laser (VCSEL) technology, which the Board believes will soon play a key enabling role in a number of high volume consumer applications. Notable applications of VCSEL technology include finger navigation, optical heating, internal interconnectors and external optical connectors such as Active Optical Cables and Intel’s Light Peak technology, which will provide data transfer speeds 10-200 times faster than existing connectors such as USB cables. In addition, demand continues to grow strongly for wafers to create energy-efficient products such as Concentrator PhotoVoltaics based on compound semiconductors and light emitting devices based on Gallium Nitride, with notable milestones achieved in bringing both these products to mass markets. First-half performance was also boosted by a return to growth for the Group’s silicon-based epitaxy services for high-performance electronic products, with a high level of interest in new products such as germanium on insulator (GeOI), launched in 2009, and Silicon on Sapphire (SOS). The outlook for the second half remains positive with the Board expecting continued strength in sales volumes driven by increasing demand for smartphones and high-speed wireless technology, as well as for consumer optoelectronic devices. Demand-driven growth is being reinforced by an increasing trend towards outsourcing across all the market sectors in which the Group operates. Dr Drew Nelson, IQE’s Chief Executive, said:“Strong growth has returned in IQE’s key markets with higher than expected sales of smartphone products in Q1’10 and accelerating growth for optoelectronic products and silicon-based epiwafers for innovative consumer technologies. In addition, demand for energy-efficient third-generation CPV solar products and Solid State Lighting (SSL) devices continues to grow strongly. “The Group’s operationally geared model has translated strong revenue growth into even stronger growth in profits and the Board remains confident of strong demand for IQE’s world-leading products in the second half of 2010.”IQE expects to report its interim results on 1 September 2010.

About IQE IQE is the leading global supplier of advanced semiconductor wafers with products that cover a diverse range of applications, supported by an innovative outsourced foundry services portfolio that allows the Group to provide a 'one stop shop' for the wafer needs of the world's leading semiconductor manufacturers. IQE uses advanced crystal growth technology (epitaxy) to manufacture and supply bespoke semiconductor wafers ('epi-wafers') to the major chip manufacturing companies, who then use these wafers to make the chips which form the key components of virtually all high technology systems. IQE is unique in being able to supply wafers using all of the leading crystal growth technology platforms. IQE's products are found in many leading-edge consumer, communication, computing and industrial applications, including a complete range of wafer products for the wireless industry, such as mobile handsets and wireless infrastructure, Wi-Fi, WiMAX, base stations, GPS, and satellite communications; optical communications, optical storage (CD, DVD), laser optical mouse, laser printers & photocopiers, thermal imagers, leading-edge medical products, barcode, ultra high brightness LEDs, a variety of advanced silicon based systems and high efficiency concentrator photovoltaic (CPV) solar cells. The manufacturers of these chips are increasingly seeking to outsource wafer production to specialist foundries such as IQE in order to reduce overall wafer costs and accelerate time to market. IQE also provides bespoke R&D services to deliver customised materials for specific applications and offers specialist technical staff to manufacture to specification either at its own facilities or on the customer's own sites. The Group is also able to leverage its global purchasing volumes to reduce the cost of raw materials. In this way IQE's outsourced services, provide compelling benefits in terms of flexibility and predictability of cost, thereby significantly reducing operating risk. IQE comprises seven operating facilities located in Cardiff (two), Milton Keynes and Bath in the UK; in Bethlehem, Pennsylvania and Somerset, New Jersey in the USA; and Singapore. The Group also has 11 sales offices located in major economic centres worldwide.